March 21, 2020

INSURANCE ,Reinsurance, Life Insurance, IRDA,ULIP,Annuity, Actuary,Endowment Plan,Bancassrance,


What is insurance:- Insurance is a mechanism to provide protection and cover against unforseen risks in life. It enables the individual to reach for safeguards against uncertainties in daily life. Insurance is the process of transferring future anticipated risks against economic protection in the event of disability, death or economic loss.                                                                            

An insurer or insurance carrier is selling the insurance; the policyholder is the person buying the insurance policy. The amount of money charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risks has evolved as a discrete field of study and practice.                                                                                                                      The Structure of Insurance Sector:The Insurance sector in India is primarily divided into (I) Life Insurance, (II) NonLife insurance, (III) A very small segment comprising Reinsurance.                                                        

(I) Life insurance: Life insurance is an insurance cover that gives out a certain amount to the their nominated beneficiaries upon a certain event such as death of individual who is policyholder. For our convenience and better understanding it would not be wrong to state that life insurance is related to a human life. It is basically a long term investment and requires periodic payments, either monthly or quarterly or annually. The risks that are covered by Life insurance include- premature death, income during retirement, illness. The main products for the same consists of - whole life, endowment, life annuity plan and  term medical and health.                                                                                                         

(II) Non Life insurance: Non life insurance is a contract which indemnifies the policyholder against financial loss suffered by him, owing to an adverse event, against premium paid by the policyholder to the insurer.                                       

The prominent insurance covers available under this head are- 

(i) marine insurance: which relates to loss in marine adventure, 

(ii) Fire insurance: For protection against loss due to fire of policyholder's property,

 (iii) Personal accident Insurance: Covering death or disability of the policyholder from accident, 

(iv) Mother Vehicle Insurance: Which is cover against theft or damage to the policyholder's vehicle and injury or death of owner or passengers traveling in the policyholder's vehicle.                         

 (III) Reinsurance: Reinsurance is resorted to when the insurance company transfers a part of the risk to another insurer, Since the total risk amount of policyholder is too high for the insurer. The policyholder is assured of the total risk cover even though the first insurer would get the part amount reinsured from the second insurer. This is a possibility in case of high value insurance deals where one insurer is unable to bear the total risk cover.                                    

 Other information about insurance: The Indian Life Assurance Companies Act 1912, was the first statutory measure to regulate life insurance business. The consolidated Insurance Act 1938, provided for comprehensive provisions for effective control over the activities of insurers. In the year 1956, the State controlled LIC (life insurance corporation) came into existence, while in 1973, the general insurance business was nationalized however in year 2000 subsidiaries of the General Insurance Corporation were restructured as independent companies The foreign companies were allowed to ownership holding up to 26% in such companies. The number of players in life insurance is 23 and Non life insurance is 24 including ECGC ( export credit and guarantee corporation) and Agricultural insurance corporation presently. IRDA( insurance regularly and development of India) was constituted in 2000 and setup by the parliament under IRDA Act 1999. It is 10 members body with a chairman. 5 whole time members and  4 part time members. IRDA is the regular of Insurance sector.                                                                          

Insurance ombudsman: The independent authority of Ombudsman was created by the government in 1998, for quick and effective disposal of grievances of the insured customers. The powers vested in the ombudsman are for (I) conciliation and (II) passing of awards in grievances cases.                                                 

  Online Purchasing of insurance policy: It is customer centric initiative introduced by the insurance companies. The premium charged by insurance companies through online purchase of term plans have practically been halved. The distributer network is avoided in this which brings down the cost. Currently there are three options for purchasing  an insurance policy (i) From an agent (ii) From banks and (iii) Direct from the insurance company.  IRDA has issued the listing guidelines for insurance companies in 2011,Which stipulate that insurance companies after completing 10 years, can approach the capital markets for raising funds.                                                                  

  Bancassurance: Banks are now selling different financial products to enlarge their scope of activities and also to increase their earning capacity. The sale of insurance and other similar products through a bank. This can help the consumer in some situations; for example, when a bank requires life insurance for those receiving a mortgage loan the consumer could purchase the insurance directly from the bank.                                                              

 Important term related to insurance:-

 ULIP: Full name Unit linked Insurance plan. ULIP is a life insurance policy which is mix of risk cover and investment

Endowment plan: Endowment plan are long term policies having double benefit of life cover and returns.                                                                                           Money back Plan: It is both an insurance cover and savings for the future. The main feature of this plan is payment of tax free amounts of the sum assured at regular intervals during the term of the insurance policy.                                      

 Annuity: An annuity is a financial offering where the investors pays a certain quantum of funds to the insurance company and in turn receives a regular payment from the said insurance company this regular payment is called an annuity.                

Mortality Table: These tables are based on the life expectancy of the population of the country. Actuaries prepare these tables.                           

Actuary: Actuary or Actuaries are specialist in the field of assessment of risk and its calculation

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